Is downsizing the right ‘move’ for you?

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28 April 2017 • 10:24am

Many older people think about downsizing once their children have flown the nest, or once they finish work, particularly if they are looking to free up some of their property wealth to help fund retirement.

Here, we look at the pros and cons of selling up to move to a cheaper property, and explore some of the alternative options which might be available.

If you’re trying to work out when to downsize, think carefully about how much you would miss your extra space, as well as when your current home and garden might become unmanageable.

You’ll also need to consider how far away you are prepared to be from family and friends and how much you’ll have once you sell to spend on your new home.

Things to consider

Downsizing is a major upheaval and there are significant costs involved, so it’s essential to factor these in before you make your move.

You’ll not only have to pay estate agency costs for selling your home, but you’ll also have to pay stamp duty on your new home, as well as covering removal costs and legal fees.

These costs, combined with the stress of a move, can be too much for many people, who may want to consider alternatives to downsizing to free up funds from their property.

How equity release could help

If you’d rather stay put in your current home, but need or want to unlock some of the wealth in your property, equity release is one option which could help.

As the name suggests, this type of scheme enables you to release equity from your home, while continuing to live there.

Latest figures from the Equity Release Council, which is the trade body for the equity release sector, show that 8,531 new equity release plans were agreed in the first three months up this year alone, up 61% compared to the same period last year.

A record £2.15 billion of housing wealth was released via equity release schemes in 2016.

How equity release schemes work

The loan plus any interest owed is only repaid to the equity release provider either when you and your partner move pass away or go into long-term care.

Steve Wilkie, managing director at equity release specialists Responsible Life, said: "The equity release market had a record 2016. The industry has innovated to appeal to a wider audience and more homeowners are using the equity in their homes for a host of reasons, from supplementing their retirement income, to providing lump sums to pay off mortgages and clearing debts.”

Always seek professional financial advice if you are considering equity release, as it can affect your entitlement to state benefits and will reduce the value of your estate.

By taking money out of your property now, a Lifetime Mortgage may reduce the value of your estate. A Lifetime Mortgage may also affect your entitlement to means-tested state benefits, but an adviser can walk you through the impact of this before you decide to proceed.

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